Sustainable office buildings more valuable says the Australian Property Institute

The “added value” of green office buildings, in some cases a premium as high as 21 per cent, has been confirmed by the Australian Property Institute’s research report Building Better Returns,released last month.

The research took a portfolio of green office buildings in Sydney and Canberra and benchmarked them against a portfolio of non-green office buildings using financial data, including rent, value, outgoings, and yield and occupancy rates.

The report found that:

- 5 star NABERS energy rated office buildings delivered a 9 per cent green premium in value and the 3-4.5 star NABERS energy ratings delivering a 2-3 per cent green premium in value.

- A clear link between enhanced green premiums in value with the higher rated NABERS energy rating categories.

- Green premiums in value differed in specific office markets, being most evident in the Sydney suburban office market (8 per cent green premium) and the Canberra office market (21 per cent green premium) in the 5 star NABERS energy rating category. This compares with the lesser impact in the Sydney CBD office market (4 per cent green premium).

-Evidence of major discounts in value in the lower NABERS energ rating categories (less than 3 stars) for the Sydney CBD (10 per cent discount in value) and Canberra (13 per cent discount in value).

- The Green Star rating showed a green premium in value of 12per cent.

- These office market green premiums in values and rents for Green Star and the top 5 star NABERS energy rating are generally comparable to that seen in recent US green office building studies.

The steering committee overseeing the report said:

“Investors need material evidence that proves the financial performance of sustainable investments. This report provides the economic rationale for sustainable property investment and development.”

The report noted that a future challenge for the property industry is the need to assess whether green premiums will soon reflect office market norms, subsequently resulting in discounts for non-green office buildings.

“This will soon see green office buildings as the benchmark market rather than non-green office buildings. This feature has already become evident in some of the analyses in this report,” it said.